The Week Ahead: Stocks at Resistance

As we look towards the first full week of February 2019, stocks appear to be in a strong position. The S&P 500 (SPX) has gained more than 15% from its late December low. And the benchmark stock index is only around 8% below its September all-time high (as of the 2/1/2019 market close). The rebound in January was indeed epic. As we mentioned in a previous post, last month was the best January for S&P 500 performance since 1987. And it was also the best single month for gains since October 2015. Will this continue? As we enter the new trading week of February 4, 2019, we bring you the Week Ahead: Stocks at Resistance.

The Technicals

The S&P 500 closed last week very near a major resistance area around the 2710-2715 range. This is right around the current position of the key 100-day moving average as well as an important 61.8% Fibonacci level. That Fib level is determined by measuring from September’s all-time high down to the late December low. This confluence of resistance around where the S&P 500 last closed on Friday makes for substantial uncertainty going into the week ahead. Also, the index is still under a technical ‘death cross’ (50-day moving average crossed below the 200-day moving average), a significant bearish indication.

February Has Some Headwinds

So far, the big January rebound has been driven mostly by a slew of strong company earnings releases as well as a cooperative (dovish) Federal Reserve. Add onto that some positive U.S. economic data, including Friday’s much better-than-expected jobs report. However, there are still factors that could cause investors to lose confidence once again. Perhaps chief among these concerns may be any negative developments regarding U.S.-China trade negotiations. We’ve already seen a few companies (AAPL, CAT, NVDA) recently get hit by some severe stock troubles due to concerns about China’s economy and trade.

The Week Ahead

In the week ahead, the key technical event to watch for will be whether the S&P 500 can surmount the noted resistance. Any turn back down from resistance could be a highly bearish indication. Of course, a breakout to the upside would be a substantially bullish one.

An important economic event scheduled during the week will be the U.S. ISM Non-Manufacturing (services) PMI on Tuesday morning. Also on tap will be a lot more company earnings releases. Some of the most important ones include: GOOGL, FOXA, DIS, LLY, MET, AIG, TMUS, and TWTR, among many others. (Check out our Market Events and Earnings Calendar for more.)

IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.

Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.

A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart